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On January 1, Year 1, Jones Company issued bonds with a $200,000 face value, a stated rate of interest of 7.5%, and a 5-year term to maturity. The bonds were issued at 97. Interest is payable in cash on December 31st of each year. The company amortizes bond discounts and premiums using the straight-line method.

-What is the amount of cash outflow from operating activities shown on Jones' statement of cash flows for the year ending December 31,Year 2?
A)$15,000
B)$16,200
C)$13,800
D)$17,400

Question

[The following information applies to the questions displayed below.]

On January 1, Year 1, Jones Company issued bonds with a $200,000 face value, a stated rate of interest of 7.5%, and a 5-year term to maturity. The bonds were issued at 97. Interest is payable in cash on December 31st of each year. The company amortizes bond discounts and premiums using the straight-line method.

-What is the amount of cash outflow from operating activities shown on Jones' statement of cash flows for the year ending December 31,Year 2?
A)$15,000
B)$16,200
C)$13,800
D)$17,400

Quizplus · Accepted Answer

Annual interest payment = Face value of $200,000 × 7.5% = $15,000

[The Following Information Applies to the Questions Displayed Below